Case 1 – focusing on quality and price

Challenge
Client X was buying components directly from factories; 200 000 pcs per year á 2 USD. There were 20 shipment per year; they were not fully happy with their supplier network and faced quality problems in 3% of the products. The QC problems with the component deliveries lead to problems with their assembly line. They had one full time purchaser focusing solely on Far East Purchasing. 

Solution
After starting with Buying Office Asia, better factories were found and better buying prices were negotiated. The actual buying prices from factories were reduced by 10%. Thanks to improved quality from the new factories and Buying Office Asia’s online QC we were able to reduce the quality problem rate in to less than 1%. Total salary costs from Buying Office Asia were 15 000 USD per year – additionally there was an agreed commission of 8% based on the purchase value.

Comparing the costs and savings

Before
– purchase cost: 400 000 USD per year
– quality problem level: 3% per year
– costs for using outsourced QC: 10 000 USD per year
– costs for in-house purchaser: 70 000 USD per year
– Total: 480 000 USD

After
– purchase cost: 360 000 USD
– Buying Office salary costs: 22 000 USD
– Buying Office commission (8%): 28 800USD
– quality problem level: 1%
– 50% savings in the time of the in-house Far East purchaser: 35 000 USD
Total: 445 800 USD

Summary
– savings of 7.1% (34 200 USD)
– amount of goods with quality problems reduced by 2%
– considerable cost savings, better quality, increased efficiency in assembling, ease of mind, full transparency